Equal Opportunity - Without Minority Set-Asides

By Edward I. Koch; Edward I. Koch, Mayor of New York City, has frequently criticized hiring quotas for minorities and women.

Published: February 20, 1989

In City of Richmond v. J. A. Croson Co., the United States Supreme Court dealt a severe, perhaps fatal blow to local minority set-aside programs, the practice of reserving a fixed percentage, or quota, of public contracts for companies owned by minorities.

Reasonable people may differ on how best to expand economic opportunity for minorities and women, groups that traditionally are denied equal access to public contracts. Some legal experts and commentators have sought to limit the impact of the Supreme Court's decision by focusing on the opinion's loopholes.

In my view, the search for ways to preserve the option of racial set-asides misses the Court's larger lesson: The Richmond case should stand for the simple proposition that, as a matter of policy and constitutional principle, public contracts should not be awarded solely on the basis of race.

The constructive response to this sweeping decision is to reaffirm the principle of equal treatment, rethink the reasons for set-aside programs and, mindful of the imperative for color-blind policies, implement a different type of economic set-aside program.

I offer New York City's experience as a guide to the 36 states and nearly 200 cities that now administer racial set-aside programs. Our approach has been to shift the focus from the race, ethnicity, gender or religion of the owner or owners of the business seeking the public contract to the size of the business, the community being served by the business and the employees of the business.

The best illustration of our approach is the locally based enterprise program established in 1980. To qualify for participation in the program, a firm must be located within New York City, have average annual gross receipts of $500,000 or less (or $1.5 million in the case of a heavy-construction firm) and have done at least 25 percent of its business in economically distressed areas or employ economically disadvantaged persons for 25 percent of its workforce.

The program's goal is to award at least 10 percent of the city's construction contracts to firms that meet these criteria. We require any contractor who works on a city project using subcontractors to earmark at least 10 percent of the total project for certified locally based enterprise firms. Bonding requirements are waived on all such subcontracts and the city offers technical assistance and working capital loan guarantees to participating companies.

The results are impressive. Between 1982 and 1987, fully 575 qualifying firms received contracts valued at $375 million. About 30 percent of that money went to companies owned by minorities or women. For the last four years, we have met or exceeded the goal of awarding 10 percent of all contracts to qualifying firms. Over the life of the program, thousands of new jobs have been created - and two-thirds of the employees of all qualifying firms are minorities.

This month, the city announced legislation to expand this program by raising the dollar limits on eligibility, and we are applying the same concept to contracts for goods and services in the small business enterprise program. We have also instituted a joint venture program to require major contractors in housing construction, street and highway repair work and environmental projects to enter into joint ventures with small businesses, many of which are owned by minorities or women.

Although our programs provide significant opportunities to groups that have historically received a small piece of the public works pie, such as minorities and women, our programs are not solely remedial because they also provide opportunity to businesses owned by white males. But the city's approach serves a larger objective: Our programs provide opportunity to all small and struggling businesses, they use the power of the tax dollar to leverage tangible benefits to economically distressed communities and they provide jobs to people without work.

Without sacrificing our commitment to equal treatment irrespective of race, government can and should use its enormous powers to assist those in greatest need. Without resorting to artificial mechanisms such as racial set-asides, government can and should increase opportunities for people who historically have been victims of discrimination.